Myself and a few other bloggers had the pleasure to meet in a "round table" discussion format with Blue Jackets Senior Vice President and General Counsel Greg Kirstein as well as Blue Jackets Vice President of Public Relations Todd Sharrock to discuss the arena lease problem that has made major headlines over the past few days.
First I'm going to give you the meeting minutes of what was discussed yesterday. Unless otherwise noted the majority of the commentary was from Senior Vice President and General Counsel Greg Kirstein. Here is a rough transcript in terms of what was discussed in an outline type format which is similar to the way the information was presented:
OVERVIEW OF ARENA LEASE ISSUE
This isn't just about just the Jackets... Its about arena, the arena district and what we think is the most vibrant part of dowtown Columbus. The last 5 days it's turned into save the Jackets.. we think it's much more bigger than that.
750k to 1 mil people a year come down to enjoy the district.
In our view Nationwide is not the bad guy. Without them there is no arena, no arena district.. no jobs in the surrounding area or the taxes they create. They've also offered to be part of the solution. I.e. Sell building at substantial loss. Take proceeds in sale and invest in team and become a minority owner and have offered to sell the naming rights.
That would still leave an annual shortfall of 10 million dollars.
Political community was consulted. Meeting over last 2 months with state, county and the city. We feel we presented a comprehensive plans. It mimicked Cleveland where the Cavs/Indians/Browns stadiums have been built with alcohol/cig tax. It takes state legislation to give the county commissioners that tool to invoke those taxes -- then the county decides if they want to invoke that tool.
The state we were at when this became a matter of public controversy was trying to have the state give the Franklin County Commissioners that tool which was some 2 months into the process.
The solution must include the public in someway. So far since 1998 this entire development has largely been one company Nationwide and one family the McConnells.
NATIONAL LANDSCAPE OF ARENAS ACROSS COUNTRY
Overwhelming majority of sports facilities in the US are paid for with either public funds (100%) or public/private funds.
There have been 37 arenas built since 1990 that went to a public vote. 34 of them either passed or passed on 2nd vote or the state legislation stepped in and said we are going to do it anyhow. Only 2 of them ended up being built by private funding. Nationwide and San Francisco (MLB Giants).
This is basis for why we've been saying to the media that the conventional way to operate a stadium is through public funding.
To compensated for lack of public funding Nationwide took the following measures:
* Kept naming rights without paying for them as they felt they made their contributions with building stadium
* Retained certain # of suites
* Retained parking revenues
Jackets pay the following to Nationwide:
* A ticket surcharge to Columbus Schools
* Pay for rights to concourse to in turn sell the rights
* Pay to have maintain facility
* Pay for practice facility
* Pay for pat of concession stands
* Pay for offices
Those are not normal but had to happen b/c of the lack of public funding per the 1997 vote (to move forward with arena to meet NHL deadline).
So why didn't losses show up earlier?
* There is always a honeymoon period with a new building such as what is happening at Huntington Park. That honeymoon period always masks these kinds of leases.
* Player payroll was much lower. Year 1 player payroll was 22 million. Last year player payroll was 50.8. Payroll is up 28.8% over the course of 9 seasons.
With a full house combined with a 20 million payroll the lease problem didn't rear its ugly head. However what the public saw in the standings was also unacceptable (hence the higher payroll to ice competitive squad).
* There is a healthy and vibrant competition from Schott for shows. As LA and NY promoters tell us Columbus has two A buildings in a B market.
* Lukewarm concern industry. Concerts will average 5 to 8k people over next 10 years. The days of 15 to 18k on average are gone.
* Lockout for newer teams had a significant effect. Singled out the teams in Nashville, Atlanta and Columbus. Minnesota seemed to have weathered the storm (which obviously is b/c they are not a "new" hockey market"). Played for 4 years then closed the door. The die hard is still here but not sure the casual fan has come back.
* Economy. Its a reality but not an excuse. The lease problem has been here since day 1 before the bottom dropped out of the economy so not going to lean on that.
* TV Market. 23rd in size of the 24 US markets. Only Buffalo is smaller and they are not permitted to count their fans in Southern Ontario b/c that falls under Canadian government rather than the FCC.
* 32nd ranked TV market in the country which makes it difficult to demand larger dollars at the negotiating table with FSN OH -- particularly when other clients in Cavs/Reds are in larger markets.
PRO-ACTIVE STEPS TAKEN
OSU John Glenn Affairs Economic Study of Arena District from 98 to 08
Performed by an independent body of people who do this for a living. Paid for by Convention of Facility Authority, Jackets & Nationwide.
* Blighted penitentiary area has become the most vibrant part of Columbus... now spreading through to the Short North.
* Concluded that driving force behind that is the team.
* From Jason Cowen article titled "Budget travel Columbus happening":
"For a place obsessed with college football, Columbus owes much of its revival to pro hockey. When Nationwide Arena opened in 2000 people not only came to see the Blue Jackets but they began to spend more and more time and money in the once gritty Short North Area"
Statistics shared from impact study:
* A Billion dollars in investments
* 2 Billion in economic activity
* Through close of 2006 172 businesses in district, 7000 employees
* 1 mil sq ft of office space
* 350 mil in annual wages in surrounding area
* 6 housing complexes; 800 residents
* 850 million in visitor spending in 10 years
* 78% believe its the Jackets who give rest of country the idea Columbus is a big city
* 90% are proud we have the team
Two biggest crowds have been UFC with Hanna Montana right behind them.
Mitchell Zeets Study.
Michell Zeets is from NJ. Foremost experts in stadium/arena financing across country. Been engaged by 10 NHL teams and 3 NBA teams.
Objective of study:
Take a look at our lease and look at everyone else's lease and tell us what the problem is.
Jackets came in at 12.1 mil per more year than a comparable NHL team. There is no profit to be made even if the Jackets sold out all 41 NHL games with that kind of gap. Teams in similar situations have done two things:
1. Restructured their leases or
2. Continued to suffer substantial losses
The Jackets can't keep team competitive if the building continues to loose substantial money. The public won't stand, as they've shown, not to keep the team competitive (so that is not an option).
Nationwide willing to help close that 12 million dollar gap. For that to happen Nationwide Arena has to have some form of public subsidy.
To become publicly owned or supported you need a arm of the gov to help you -- in our world that would include a purchase of the building.
Knew Franklin County voters had previously voted down 3 different mechanisms which were bonds, income tax and sales tax.
Knew that the Reds/Bengals had new stadiums via sales tax but knew that wasn't an option here as it was previously voted down.
Knew alcohol/cig tax had a successful 15 year run in Cleveland in building the Jake (Indians) and Quicken (Cavs) and then they also extended it to fund the Browns stadium and the idea is to mimic that plan.
Knew couldn't use the same law Cleveland used as it expired in 2005 so in order to mimic it a new law would have to be created.
So how does a new law occur?
The deadline for any amendments for the 09/10 fiscal year budget bill was essentially last Friday. So in order to get the legislation the Jackets sought they would have needed to have included the enabling tool (i.e. sin tax in this case) and then see if the county commissioners would want to utilize this tool. The preparation to have this tool included started in April.
THE PLAN PRESENTED
1. County to buy building.
Why would county buy building?
Take building that is worth 150 to 175 mil and they would buy it for substantially less. They already own land that it sits on. They own conventions center. They own the land and ballpark across the street.
2. Nationwide would take a loss on the building as part of their contribution. They would reinvest the sale proceeds into the team and become a minority owner.
3. How does the county get the money to buy the arena?
The county issues bonds to finance the purchase.
4. How do the bonds get repaid?
The alcohol and cigarette tax.
This would have affected Franklin County only. Would not affect you if you don't purchase those products. No affect if you buy outside of county. Know that no one likes the word tax. Tried to minimize it.
Plan would have added:
* 2.3 cents on a bottle of beer.
* 4.5 cents on a pack of cigarettes.
* 6.5 on bottle of wine
* 60 cents on 5th of liquor.
Anticipated there would be opposition no matter what industry was chosen. Took no issue with that and knew there would be respectful rejection from their lobbying groups.
HOW IT WENT DOWN
Felt that they presented a comprehensive proposal to the county and state officials. It wasn't presented as comprehensive as they'd like to the city as when contacted, the Mayor politely and respectfully responded that he had his hands full of his own tax issue on the Aug 4th ballot. This was viewed as a fair response.
1. The county had been informed with no significant objection at the time.
2. The city was informed but as mentioned, they said thanks for the call but we have our own tax to focus on.
3. State Senate was prepared to introduce the legislation.
4. Next step was to meet with House of Representatives (other arm of state legislature) and get their buy in.
5. Anheuser Busch as well as Wine and Beer lobby group got wind of situation and let the cat out of the bag well before the Jackets were prepared to release statement. They lobbied hard against plan.
5. State wanted a very clear show of county commissioner support late in the day last Friday. State never received that show of support.
7. Sin-tax plan dead.
Jackets have been asked to look at other ways to fix lease issue. Certainly willing to do that.
Think its the business community, Columbus Blue Jackets, Nationwide and - they can't stress enough - public participation to find a solution.
Public participation has to get involved at this point. It has to go beyond comment and endorsement to public funding.
Some think its a backwards argument compared to the other arenas that were referenced. Their counter is it could be looked at as the city of Columbus have had a 10 year run of not paying for something that is generally paid for in most of the major league sports towns across America.
CALL TO ACTION
If you subscribe to the Jackets theory, and they point out that they understand there will be differences of opinion, then place a call to the city and county commissioners (numbers provided at end of post).
The ask is to let these public officials know that you expect them to be part of this solution. They can't walk away from this. They have to part of the solution.
After they get their involvement they'll get the collective wisdom in a room and hammer out a solution that is more palatable than a alcohol and cigarette tax.
Other points discussed after presentation:
* Fully aware that timing is horrible. Not only economy but after just completing their most successful season to date. However waiting another year would only make things worse.
* Revenue sharing helps however the NHL revenue sharing plan, unlike the MLB, does not share local TV revenue. In other words MLB teams for instance get a slice of the Yankees (YES) TV contract whereas in the NHL the Leafs keep every penny generated from LeafsTV.
Those are the general highlights from the overview that was provided in terms what has transpired over the past 14 months.
Q - Why wait until Jan 1st, 2008 to start looking to fix this ?
A - Mike Priest given two priorities by Mr. Mac when hired:
1. Fix hockey operations - June 2007 --> Howson hired. Hitch extended. Bad contracts shed. Team makeover which takes time.
2. Fix business operations - January 2008 --> Arena & District study. Mitchell Zeets report. Solutions. Present.
Q - Why not work on solidifying foundation before working on making the house look pretty?
A - Right or wrong the decision is if the team continued to flounder on the ice it wouldn't matter what they did with the lease. Can't ask the business community or the politicians to support a bad product.
Q - What are you guys doing to try to engage other businesses in the Arena District to help spur more support for this effort? While Nationwide is a local business in and of itself its certainly not the only business downtown that will be impacted by this?
A - The Chamber of Commerce has been engaged and they seem to be the best focal point to represent all the business from the mom and pop community oriented business to the large businesses. We've asked the Chamber for the same call for action upon county and city government that is needed to be part of this fix.
On a grass roots level we spent last Friday reaching out to most of the folks in the district to call the county to express their support for this effort as the goal is to have a viable area for the next 30 to 40 years.
It's not "bail out the Blue Jackets"... it's "fix the lease issue".
Q - How do you get the message out that this problem is more than the Jackets?
A - It starts with you. It is more than the Jackets. If constituencies have come down to the District and had a good time then they need to call the county and say please go to the table and help these entities find a solution.
This wasn't done half-way and this wasn't done overnight. We thought we made a solid proposal. We are all ears from whomever has a next better proposal. We are still going to try to come up with one too but we are still recovering a bit from one we thought was well thought out proposal that was spread across large bodies of people.
Q - Has your proposal dropped out of the picture of the state proposed budget bill?
A - I think we are dropped out of the picture this evening. You use the June 30 deadline and work backwards. It's the senate version of the budget that will be presented any day now. It still has to go to the House. Then on to a conference committee to resolve differences. Then there are the amendments to be piggy backed on.
If you weren't in the game June 1st with an amendment you probably weren't going to make June 30. It's fair to say our proposal is not in the amendments that are floating around the state house because it did not get the support from the county commissioners on Friday evening.
Q - Have you done a economic study of how the district fared during the lockout year when the team did not play? That could paint a one year portrait of what that area would look like without the hockey team.
A - During the lockout Nationwide cut the Jackets a rent break. The bars and restaurants were impacted the most and their rents were also cut. It became difficult to schedule concerts/events b/c a lockout can end at any time. This of course had a spiral effect which led to closed doors and shorter hours for surrounding businesses.
Q - Perception is that this proposal looked like a last second proposal to be rammed down the throats of Franklin County. How do you respond to that?
A - We got the Mitchell Zeets final report in March. That gave us the 2nd piece of evidence on problems with the lease. We started with the government in April. It's fair to say that this has been going on for two months even thought it may seem to the consuming public like it just started last week.
It sounds like statehouse gibberish but the whole idea was to have the legislature empower Franklin county with two options 1. subject tax to a vote or 2. use power to impose tax. We left that up to the county commissioners. It's unfair for State to enable County but the Jackets to dictate how it should be. They have a duty to the public so it was intentionally crafted so it could be either. So to call it a "cram down" is not accurate.
Q - What do you say to Blue Jacket fans out there who are worried about the future of this team? More directly about them moving?
A - Mike said it last week and I'll say it again. The focus on this right now isn't on moving. You saw what the team did last year at the trade deadline. Those moves were made to strengthen team and bring the fans back, not to move.
Q - ..but if you don't get public support (to fix the lease issue)?
A - Scott is going to go to the draft to try and make the team stronger... then on to free agent signing period a week later to try and make the team stronger. We got the sense from some of business community and political leaders that everyone understands that a solution needs to be found.
We are not discussing this team going away at this point.
Q - Have you been contacted by Jim Basillie?
A - No. His situation is between the league powers and Phoenix.
We have not spent a minute on moving. We have spent 14 months on fixing. Now it appears we will have to spend a little more time fixing.
Q - Is John P. as committed to the frachise as John H. was? We never heard about lease problems, financial problems, etc when John H. was alive.
A - To be fair to John P., the losses that have occured since John H. passed away John P. has funded. It's unfair to say there has been a decrease in support as the 08-09 losses have been funded by John P.
Secondly as Mike said last week, one family can only sustain these kinds of losses for so long. They are at 80 million over the past 7 years. I think it's unfair to ask someone to keep doing that. If you canvass the country many teams are not owned by families anymore they are owned by big conglomerates. So as a family owned small market team the McConnells have done their fair share. It would be simple for John P. to put the "for sale" sign up but that is not what Mike and the rest of us have been commissioned to do - we've been commissioned to find a solution.
Sharrock: Mr. Mac was aware of this before he passed. He was well aware of this. When he asked Mike to get involved there were two things to be addressed 1. the on ice product and 2. the business side. Nothing has changed with Mr. Mac's passing on that either. I know what the perception has been and what people have said and it's unfair, grossly unfair to John P. It has no basis in fact. His intentions have always been in lock step with his fathers involvement and why this team was brought here.
Q - Is John P's committment as strong as John H's?
Sharrock: I don't think there is any question.
Kirstein: Those of you that really study this you'll know we aren't spending at the floor. There wasn't the no moves at the deadline that Nashville experienced last year. You saw the green light Scott was given last offseason and at this year's trade deadline. That green light came from John P. and out of fairness to him the committment has been the other way.... Scott isn't going to try to have the team get worse this summer... he's going to try to make it better.
Q - Are there any planned payroll cuts?
A - No. We expect, and if it doesn't happen the lawyer said it and not the GM (laughter), we expect Scott to be in the mix come July 1st.
Q - If McConnells/Wolfs thought the building was a money-maker you would think they'd just buy it? Or is this building always going to be a loser and that's why the government needs to subsidize it and the corporation wants to sell it?
A - I don't think its just this building. I think its most sports buildings in the country. If you follow the San Fransciso 49ers situation the city of Santa Clara is putting up major dollars because if it was privately funded it just wouldn't make it. They are hugely expensive to operate, they are empty most of the time, they still need staff, they are hugely expensive to clean, they have to have all the bells/whistles from scoreboard to riggings for shows. What's occured and right/wrong communities have been asked -- do you want professional sports to be part of your base? Is it as imporant to you as the bike trail, the fishing pond and the tennis cort?
I'm not going to make this too long as lord knows your eyes are probably hurting by this point anyways.
I went through the process of typing all of that up because I believe it is very important to understand where the Jackets stand in this situation and then use that information to formulate your own opinions.
That was straight from the horses mouth and I believe they were as transparent as they could be.
As for my opinion here is where I stand.
This situation isn't perfect. Its far from it. In fact from what I have been told moving from a privately funded arena to a publicly funded one has never been done before. It's unprecendented.
It's a difficult challenge but not insurmountable.
While I'm not buying everything I was sold yesterday I do buy the fundamental message they wanted to relay and that is that this arena cannot survive with the way the lease is currently structured and they need help in the form of some kind of public subsidy.
Heck there are more angles to be considered than a protractor here which is always the case in a high profile problem. Property taxes, appreciating assets, depreciating assets, etc, etc. It's enough to make anyone's head spin. Basically it all comes down to the almighty dollar.
What I can tell you is that I beleive this is a very serious issue and that I'm very concerned about the future of pro hockey in this market if this lease issue does not get addressed.
Both Kirstein and Sharrock were careful to avoid the "move" or "sell" options but certainly that is a tool available to the franchise should this not gain the neccessary traction.
If the state government can give a company like Chase 20 million in tax breaks to bring in 1000 jobs it can certainly come up with a plan to save a countless businesses and 7000 jobs.
Certainly the county, who helped fund a new home for a new AAA baseball stadium that wouldn't exist without the Arena District, can help contribute to a solution to this lease issue right?
The Arena District, its arena, its businesses, its jobs, its pro hockey team and the city they all call home have come too far to let such a vibrant part of it slip away.
I've been told (by another credible source) that 10 people called in against the "sin-tax" plan when the news broke. I've also been told in voting terms every call is equated to 10,000 votes. That was enough for the county commissioners to pull out.
That combined with lobbying groups was all it took to kill the Jackets plan folks.
After chewing on this situation for a few days and after last night's meeting ultimately I came to the conclusion that public funding is going to be required to keep this team in this market in one form or another. Regardless of on agenda or another. It could be under the current ownership group or another. That could be in the form of tax, gambling or another solution. The issue can be raised now or next year.
Bottom line is that no matter how we got here this is where we find ourselves and everyone has to do their part to fix it. It has to happen. It just isn't going to work long term in this city in a private arrangement.
Everybody out there has their own decision to make but this is one fan who will be placing some calls and demanding that the Franklin County Commissioners help find a solution to this problem.
I'm not taking this situation lightly and hoping it works itself out. I don't want to wake up 5 years from now and look in the mirror and wish I would have done more.
Mr. Mac gave us all a gift. Let's not waste it.
It's time for action.
Franklin County Commissioner Contact Information
Board President Paula Brooks
Commissioner Brooks Contact Information:
Aide to Commissioner Brooks
Commissioner Marilyn Brown
Commissioner Brown's Contact Info:
Aide to Commissioner Brown
Commissioner John O'Grady
Commissioner O'Grady's Contact Information:
Aide to Commissioner O'Grady